Household portfolio allocation and stock market beliefs: Evidence from Japanese households

This chapter provides estimates of income inequality, income mobility, and wealth inequality for Japan. Income and consumption inequalities that are measured by the Gini coefficient, and estimated using data from the Keio Household Panel Survey (KHPS), suggest that there was little change in income inequality in Japan during the period 2004–2008. Compared to earlier estimates of short-run transition probabilities for the 1990s and 2000–2001, the probability of a household staying in the same income quintile group was much higher in 2004-2005 and 2007–2008. Finally, using data from the KHPS and the Japan Household Panel Survey (JHPS), Japan's asset holdings were compared to those in other high-income countries. The proportion of Japanese households reporting that they own some type of financial asset, about 80 percent, is similar to that reported in most countries included in the Luxembourg Wealth Study Database.

We use data from the Panel Study of Income Dynamics to investigate how households' portfolio allocations change in response to wealth fluctuations. Persistent habits, consumption commitments, and subsistence levels can generate time-varying risk aversion with the consequence that when the level of liquid wealth changes, the proportion a household invests in risky assets should also change in the same direction. In contrast, our analysis shows that the share of liquid assets that households invest in risky assets is not affected by wealth changes. Instead, one of the major drivers of household portfolio allocation seems to be inertia: households rebalance only very slowly following inflows and outflows or capital gains and losses. (JEL D14, D31)

PurposeThis study examines the impact of enhanced financial literacy on the allocation of risky assets within household financial portfolios, while also considering the mediating role of Taoist cultural influences.Design/methodology/approachThe authors applied ordered probit models and ordinary least squares estimation to analyze a sample of 19,015 data collected from the 2019 Chinese Urban Household Consumer Finance Survey.FindingsThe results demonstrate that an improvement in financial literacy significantly contributes to an increase in residents’ allocation of risky assets. This enhancement in financial literacy, achieved through financial planning and a reduction in the influence of Taoist culture, effectively bolsters the quantity of risky financial assets held. Moreover, the impact of financial literacy on the allocation of risky financial assets is particularly pronounced among residents aged 45–55 and those aged 35–45 and older.Practical implicationsThe practical implications suggest that policymakers and relevant departments may consider strategies to encourage greater participation in the financial market by promoting Taoist culture in an appropriate and reasonable manner while widely carrying out financial education for residents and improving their financial literacy.Originality/valueWhile previous studies have not focused on the impact of traditional culture on financial decision-making allocations, this study investigates the significant impact of financial literacy and Taoist culture on risky asset allocations, highlighting in particular the significant impact on middle-aged residents. This provides a nuanced understanding of how financial literacy affects investment behavior and offers insights for policymakers to effectively tailor financial education programs.

The paper explores a New Keynesian Model with diverse beliefs and studies the impact of this heterogeneity on fluctuations and monetary policy. It uses a standard model (e.g. Gali (2008), Walsh (2010) and Woodford (2003)). Aggregation is examined only for the log- linearized economy and even for this economy, aggregation problems are significant and their solutions depend upon the belief structure. Agents' beliefs are described by individual state variables and satisfy three Rationality Axioms. Belief rationality plays a key role in driving belief dynamics and mean market belief is the main tool used to solve the aggregation problems. Macro dynamics is then described by an IS curve, Phillips curve and a monetary rule similar to standard models except that mean market belief is a new force amplifying fluctuations. Due to belief heterogeneity, changes in the policy rule alter key macro-economic parameters which must be deduced from the micro equilibrium, a problem not present in a single agent economy. In addition to belief rationality agents know the equilibrium map. Diverse beliefs alter the problem faced by a central bank since a central source of fluctuations in this paper are not exogenous shocks (assumed small) but fluctuations caused by market expectations, and this alters the role of a central bank. Diverse beliefs impact response to policy due to their effect on motives to consume, supply labor etc. but market belief may support or oppose a central bank's goals. The paper draws general conclusion about efficacy of monetary rules of either contemporaneous or of expected output deviation and inflation with weights . The main conclusions are as follows. (i) Monetary policy can counter the effects of market belief by aggressive anti-inflation policy, but with cost. Large entails volatile financial markets and volatile individual consumption. Volatility of aggregate output is different from volatility of individual consumption and welfare considerations suggest that individual consumption volatility and financial market instability are at least as important goals of central bank as stability of aggregate output. The paper then shows that optimal policy outcomes require a central bank to employ moderate values of . (iii) A central bank that aims to stabilize only inflation and aggregate output can be either a one mandate bank that fights only inflation or a two mandate central bank: each can attain a different segments of the efficiency frontier. (ii) Due to diverse beliefs, the effects of ( , ) are not monotonic. (iii) As a result of (ii) the problem of output stabilization is particularly complex. Indeed, response monotonicity is a desirable property, offering a central bank feasible policy actions whose outcomes are predictable and entailing clearer policy trade-off.(iv) Both efficiency and monotonicity of output stabilization are improved if a central bank uses rules that target inflation and the causes of output volatility which are market belief and exogenous shocks, instead of output. Targeting market belief may be accomplished by targeting asset prices, which reflect market belief. As to optimal policy and forecast-targeting it is seen that under diverse beliefs a bank's optimal policy is not Pareto Optimal and may not even be Pareto improving. Central bank's policy does not alter agents' beliefs about state variables and under forecast targeting the private sector does not adopt the central bank's forecasts even when agents fully understand and accept the policy commitment of the bank since the bank and private sector may disagree about forecasts of endogenous variables. Hence, a bank's optimal policy may be carried out with private market opposition rather than consensus, as is the case under Rational Expectations. Also, an optimal policy relative to a bank's belief adds to privately perceived uncertainty of future bank's belief or actions even when the policy is fully understood.

Scholars have associated happiness with health behaviors, which co-occur and exert synergistic effects. Therefore, identifying clusters of health behaviors and their effect on happiness can contribute to the development of strategies for promoting happiness and improving health behaviors. This study aimed to examine clusters of health behaviors and their associations with socio-demographics and with happiness among Japanese adults. This study used data from the Japanese Household Panel Survey and the Keio Household Panel Survey. Questionnaires were distributed to 4,993 households out of which 1,554 responses were analyzed (participants aged 27-65 years). The survey included health behaviors (alcohol consumption, smoking, vegetable and fruit consumption, breakfast-eating habits, and physical activities), happiness, and socio-demographics. Latent class analysis was conducted to identify the clusters, whereas latent regression was employed to investigate socio-demographics related to the clusters. Logistic regression analysis was conducted to examine the relation between happiness and the clusters. Two health behavior clusters were identified: Cluster 1 (low substance use and good dietary habit; n = 817; 52.3%) and Cluster 2 (high alcohol, poor nutrition, and inactive; n = 737; 47.7%). Latent regression analysis indicated that all socio-demographics, barring socioeconomic status, were significantly associated with the clusters. The "low substance use and good dietary habit" cluster was significantly related with higher odds of happiness (odds ratio = 1.425, 95% confidence interval = 1.146-1.772, p = 0.001). This study identified health behavior clusters among Japanese adults and established the association between the "low substance use and good dietary habit" cluster and high levels of happiness. However, the causality of the relationship between health behavior and happiness remains unclear, which highlights the need for further research to elucidate the underlying mechanisms.

We explore the effects of health and healthcare utilization on household saving and financial portfolios using data from the Japanese Household Panel Survey and the Keio Household Panel Survey. Poor psychological well-being is found to be associated with lower levels of savings and smaller financial portfolios, whereas associations with poor physical health are largely absent. Significantly, our findings do not support the hypothesis that poorer physical health is associated with savings accumulation. In contrast, healthcare utilization in the form of hospital visits, hospitalization, and health screening is associated with greater savings and larger financial portfolios. This suggests that healthcare-based incentives to accumulate savings and financial wealth are related to channels associated with investment in health.

BackgroundScholars have associated happiness with health behaviors, which co-occur and exert synergistic effects. Therefore, identifying clusters of health behaviors and their effect on happiness can contribute to the development of strategies for promoting happiness and improving health behaviors.AimThis study aimed to examine clusters of health behaviors and their associations with socio-demographics and with happiness among Japanese adults.MethodsThis study used data from the Japanese Household Panel Survey and the Keio Household Panel Survey. Questionnaires were distributed to 4,993 households out of which 1,554 responses were analyzed (participants aged 27−65 years). The survey included health behaviors (alcohol consumption, smoking, vegetable and fruit consumption, breakfast-eating habits, and physical activities), happiness, and socio-demographics. Latent class analysis was conducted to identify the clusters, whereas latent regression was employed to investigate socio-demographics related to the clusters. Logistic regression analysis was conducted to examine the relation between happiness and the clusters.ResultsTwo health behavior clusters were identified: Cluster 1 (low substance use and good dietary habit; n = 817; 52.3%) and Cluster 2 (high alcohol, poor nutrition, and inactive; n = 737; 47.7%). Latent regression analysis indicated that all socio-demographics, barring socioeconomic status, were significantly associated with the clusters. The “low substance use and good dietary habit” cluster was significantly related with higher odds of happiness (odds ratio = 1.425, 95% confidence interval = 1.146−1.772, p = 0.001).ConclusionsThis study identified health behavior clusters among Japanese adults and established the association between the “low substance use and good dietary habit” cluster and high levels of happiness. However, the causality of the relationship between health behavior and happiness remains unclear, which highlights the need for further research to elucidate the underlying mechanisms.

Family finance is becoming the focus of people’s attention. Family financial market participation, family asset selection and influencing factors are core issues of family financial research center. Although compared with the past, the current rate of household participation in financial market in our country has been raised, from the current status of financial market, there are still some problems in the household investment of financial risk assets like the low proportion of investment and the low market participation rate. Therefore, under current background conditions that current financial market and financial product development in our country are still unable to meet the diverse and multilevel needs of families, this paper studies the investment of household financial assets, especially the investment of family financial risk assets. It is helpful to the design of new financial products, market orientation and target population setting as for the nation and enterprises, and then the optimization of the household financial asset portfolio. In recent years, with the improvement of the availability of micro-data, more and more scholars have paid their attention to the factors that affect the investment decision-making behavior of family financial risk assets. In this respect, some scholars have revealed the impacts of income, education level, health status, social insurance and social interaction through micro-empirical research. However, according to existing related research, few scholars pay attention to the influence and influence mechanism of money from different sources on the investment decision-making behavior of family financial risk assets. This paper seeks to fill up this gap and provides new micro-empirical evidence in this area. House demolition has always been a hot issue as for the public and the academic community. House demolition in China is usually accompanied by rich demolition compensation. From a perspective of mental account, demolition compensation and wage income earned by families through hard work are two types of money with different sources, that is, the first one belongs to windfall income, and the last one fixed income. Therefore, this paper chooses the impact of house demolition on investment decision-making behavior of family financial risk assets and its impact mechanism as the research topics. First of all, this paper distinguishes the family money sources based on house demolition. Next, on the basis of in-depth theoretical analysis, rigorous empirical research has been carried out to verify the impact of house demolition on the investment decision-making behavior of family financial risk assets and its impact mechanism, and then the impact of money from different sources on the investment decision-making behavior of family financial risk assets and its impact mechanism are revealed. The robust research results show that house demolition can significantly affect household financial risk asset investment, and this impact is reflected not only at the breadth level, but also at the depth level, that is, house demolition significantly increases the family financial risk asset investment willingness and investment proportion. The intrinsic reason lies in that the expected loss of wealth is a mediator, that is, house demolition through the expected loss of wealth affects the family financial risk assets investment. However, the mediating effect is moderated by social insurance, that is, social insurance strengthens the intermediary effect of the expected loss of wealth, and further the impact of house demolition on household financial risk asset investment. The above results also indirectly show that money from different sources has a significant impact on household financial risk asset investment decisions through the expected loss of wealth, and social insurance strengthens the impact. This paper reveals how money from different sources affects the allocation of financial assets in households for the first time. It provides a new insight for human economic behavior and results, which is a further advance of the existing research, and helps to deepen the understanding of household financial venture capital investment decisions, having a strong theoretical vanguard. At the same time, the discovery in this paper provides important reference value and guiding significance for formulating financial investment policies or market strategies, deepens financial system reform and promotes economic growth.

This paper draws on six waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) and estimates a conditional fixed effects logit model to investigate the effects of housing equity constraints and income shocks on own-to-own residential moves in Japan. By looking at contemporaneous extended Loan-to-Value (ELTV) and extended Debt-to-Income (EDTI) ratios under the recourse loan system, we examine whether housing equity constraints and negative income shocks have any impact on own-to-own residential moves. Taking account of the specific nature of the recourse loan system in Japan, we further investigate whether these effects are different between positive and negative equity households. The estimation results show that housing equity constraints and negative income shocks significantly deter own-to-own residential moves for positive equity households.

A new mode of housing tenure in Japan, rental housing with fixed rental terms, was introduced in March 2000 with the revision of the Japanese Tenant Protection Law. This paper examines the implications of this new system by analyzing the determinants of the choices by households among the three types of housing tenure in Japan: owned housing, general rental housing, and rental housing with fixed rental terms, and calculates the estimated compensating variation. Our micro-data is based on the three waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) covering all of Japan. The difference between general rental housing and rental housing with fixed rental terms is reflected in the length of the contract term and the level of rent. We carefully eliminate potential sample selection bias introduced to the conditional logit housing tenure choice model through the estimation of the hedonic price regression of each housing tenure alternative. We find that households with a smaller number of family members, those who moved from outside the local housing market, those headed by an unmarried household head, and those with plans to own a house in the near future tend to select rental housing with fixed rental terms. The estimated mean compensating variation by introducing rental housing with fixed rental terms for all households selecting that tenure is 1,205 JPY per month or 1.96% of their monthly rent. Moreover, younger and/or lower income households derived the greatest benefit from the revised law in the form of lower rents.

This paper studies an individual’s preference on trade liberalization using a Japanese household survey, the Keio Household Panel Survey. As a result, we show that preferences toward trade liberalization are affected by economic factors (income, gender, family, asset, and job status) as well as noneconomic factors (noncognitive factors and behaviroal biases). We find that male, educated, and people with smaller family prefer trade liberalization. Furthermore, people who prefer liberty to equality and have less local patriotism, tend to be positive to trade liberalization.

This paper draws on six waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) and estimates a conditional fixed effects logit model to investigate the effects of housing equity constraints and income shocks on own-to-own residential moves in Japan. By looking at contemporaneous extended Loan-to-Value (ELTV) and extended Debt-to-Income (EDTI) ratios under the recourse loan system, we examine whether housing equity constraints and negative income shocks have any impact on own-to-own residential moves. Taking account of the specific nature of the recourse loan system in Japan, we further investigate whether these effects are different between positive and negative equity households. The estimation results show that housing equity constraints and negative income shocks significantly deter own-to-own residential moves for positive equity households.

The existing literature has shown that increases in housing wealth, driven by unexpected house price shocks, have a positive effect on birth rates of homeowners. According the canonical model, a decrease in housing wealth has a symmetric negative impact on fertility behavior of households. That is, housing gains and losses of the same size should have identical quantitative effects (in an absolute sense) on fertility. In comparison, the theory of reference-dependent preferences suggests that people care more about housing losses than about equivalent gains, leading to an asymmetric housing wealth effect on a fertility decision. In our model, a utility from having a baby is weighted by a utility from house price where reference levels based on the house price at the time of purchase. The theoretical model suggests that the probability of giving birth is kinked at a reference housing wealth level and the wealth effects are discontinuously larger below the kink than above the kink. This theoretical prediction is tested using the recent survey data of Japanese households (Keio Household Panel Survey, KHPS). The KHPS is a nationally-representative, large-scale panel data started in 2004 with initial sample of approximately 4,000 households. Our empirical results suggest that, consistent with the theoretical prediction, homeowners' fertility responses are substantially larger when their housing wealth is below its reference level than when housing wealth is above reference level. Specifically, while estimated marginal effect is significantly positive when housing wealth is below its reference level, it is still positive but insignificant when housing wealth is above reference level. Furthermore, we also find that asymmetric wealth effects are robust to a number of alternative specifications, including controlling for possible measurement errors and unobserved heterogeneity of households.

A new mode of housing tenure in Japan, rental housing with a fixed rental term, was introduced in March 2000 with the revision of the Japanese Tenant Protection Law. This chapter examines the implications of this new system by analyzing the determinants of the choices by households among the three types of housing tenure in Japan: owned housing, ordinary rental housing, and rental housing with a fixed rental term; and calculating the estimated compensated variation. Our micro-data are based on the three waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) covering all Japan. The difference between ordinary rental housing and rental housing with a fixed rental term is reflected in the length of the contract term and the level of rent. We carefully eliminate potential sample selection bias introduced to the conditional logit housing tenure choice model through the estimation of the hedonic price regression of each housing tenure alternative. We find that households with a smaller number of family members, those who moved from outside the local housing market, those headed by an unmarried household head, and those with plans to own a house in the near future tend to select rental housing with a fixed rental term. The estimated mean compensating variation by introducing rental housing with a fixed rental term for all households selecting that tenure is 1205 yen per month, 1.96% of their monthly rent. Moreover, the young and/or low-income households receive the greatest benefit from the revision of the law in terms of lower rents.

The first part of this chapter draws on 12 waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) and estimates a conditional fixed effects logit model to investigate the effects of housing equity constraints and income shocks on own-to-own residential moves in Japan by comparing the effects between 2004 to 2008 and 2009 to 2014. By looking at contemporaneous extended Loan-to-Value (ELTV) and extended Debt-to-Income (EDTI) ratios under the recourse-loan system, we examine whether housing equity constraints and negative income shocks have any impact on own-to-own residential moves and whether there is any difference between the two periods. Taking account of the specific nature of the recourse-loan system in Japan, we further investigate whether these effects differ between positive and negative equity households. The estimation results show that housing equity constraints and negative income shocks significantly deter own-to-own residential moves for positive equity households even in recent financial-easing periods. In the latter part of this chapter, we use Japanese prefectural-level data to analyze the relationship between borrowing patterns and house price dynamics under the recourse-loan system. Our principal finding is that, in prefectures where homeowners are highly leveraged (i.e., have high and extended loan-to-value ratios), house prices respond less sensitively than they do in prefectures where lower leveraged homeowners are common. This finding based on the recourse-loan system is quite different from the finding under the non-recourse-loan system, because under the recourse-loan system, the lock-in effect stemming from severe equity constraints is much more severe.